Economics

The Economic Costs of Fracking

The rosy economic forecast that is being promoted by the gas industry fails to discuss the economic hardships that communities will bear during drilling and the problems they will face once all the gas is extracted and the drilling rigs leave. Based on what has happened elsewhere, communities can be in much worse shape after drilling has ended than when it is begun. As was reported in Greenwire on March 14, 2012, falling prices are now devastating boomtowns and western Colorado is struggling as energy jobs fade.

“The Cost of Fracking: The Price Tag of Dirty Drilling’s Environmental Damage”released by Environment New York Research & Policy Center on September 20, 2012 found that fracking’s negative impacts on our environment and health come with heavy “dollars and cents” costs. In their report, they documented those costs – ranging from cleaning up contaminated water to repairing ruined roads and beyond. They found that many of these costs are likely to be borne by the public, rather than the oil and gas industry and as with the damage done by previous extractive booms, the public may experience these costs for decades to come.

Susan Christopherson, a Cornell professor of city and regional planning who is leading a team of researchers in analyzing the economic consequences of natural gas extraction in the Marcellus Shale says, “There are significant economic questions to consider including projected vs. actual job creation, the burdens on local infrastructure in drilling regions and the long-term economic prospects of communities. Typically, resource extraction industries go through boom-bust cycles and produce costs to communities that remain after the boom is over….and when the bust comes, you lose that population, but you still may have [to pay for] the infrastructure that you built up.” For her current report, click here.

She states, “Supporters of shale gas drilling in New York State frequently reference a report issued by The Public Policy Institute of New York State, Inc. (PPI), titled “Drilling for Jobs: What the Marcellus Shale Could Mean for New York,” July 2011. As with other industry-funded studies, it does not mention independent research which draws very different conclusions than the industry, such as that “areas that once had thriving extractive industries end up suffering the highest rates of long-term poverty (Freudenburg and Wilson); and counties that have focused on energy development underperform economically compared to peer counties with little or no energy development (Headwaters Economics).”

Jannette Barth Ph.D.’s May 2012 paper, “The Economic Impact of Shale Gas Development: Can New York Learn from Texas”, found that economic growth in the four core gas drilling counties of Texas was actually less than in the state of Texas as a whole. Figures from 2003 – 2010 show that the mean income of Denton, Johnson, Tarrant and Wise counties was between 10% – 16% compared to a total of 21.2% for the state of Texas in that period. She reported that figures also show that unemployment and the number of people in poverty was about the same for these counties as the state. Her report also references a study of property values by Integra Realty Resources commissioned by Flower Mound, Texas, that found that “residential homes valued over $250,000 that were immediately adjacent to well sites can lose 3 percent to 14 percent in value.” Kris Wise, a realtor in Flower Mound said, “the true loss is far greater, and nobody wants to buy homes near gas wells, not even for a 10 percent price cut.”

Projected vs. Actual Job Creation

The gas companies claim that gas drilling would create a million new jobs, but their claims, like their projections of how much gas is in the ground are largely over-stated. In her latest report, The Truth About Those Industry Funded Studies”, Dr. Jannette Barth, Ph.D finds it practically impossible to square many industry claims with reality. For example, Dr. Barth disputes the claim by the Marcellus Shale Coalition that “88,000 jobs were created by the natural gas industry in Pennsylvania in 2010.” The Pennsylvania Department of Labor and Industry reports that only 65,600 non-farm jobs were created in the state that year—and almost half of those were in the education and health and leisure and hospitality industries. To see the full report, click here.

Of the people that are hired, a very high percentage of them come from out-of-state because the gas industry requires experienced workers with specialized skills. A significant portion of their income goes back to their home states, significantly lowering the amount of money that goes back into local economies.

The DEC estimates that a single gas well would require between 715 to 2615 truck trips to haul water to the well site and takewastewater from it. The draft discussion report by the New York State Department of Transportation (NYSDOT) titled “Transportation Impacts of Potential Marcellus Shale Gas Development” describes the effects of drilling as “ominous,” requiring the reconstruction of hundreds of miles of roads and numerous bridges. It estimates costs to transportation infrastructure totaling up to $378 millionand states that there is no mechanism in place to allow State and local governments to absorb these additional transportation costs without major impacts to other programs and other municipalities in the State. Click here to read the full paper. Read more about how to protect your local road infrastructure from gas drilling truck traffic.

Increased Costs for Emergency Services and Law Enforcement

Areas that have gas drilling using hydrofracturing can expect increased demands on health care and emergency room services from chemical spills, fires, and accidents on the rigs. Local hospitals and fire departments may be ill equipped to handle these industrial accidents involving heavy machinery and toxic chemicals. Law enforcement would have increased demand from the crime, drug use and prostitution that traditionally follow the influx of out-of-state workers into a community.

Spikes in Rental Prices Would Hurt Non-Industry Residents

While landlords would benefit from a rise in rental prices (Penn State University professor Timothy W. Kelsey says that in some areas in Pennsylvania, rental costs have tripled), fixed income residents and those not involved in the industry could be squeezed out of affordable housing. This could lead to homelessness and burdens on social services.

Property Values Would Go Down

In many parts of Texas, real estate appraisers have severely discounted valuations (up to 75%) if a property has a gas well. There are now agrowing number of banks in New York State that won’t give new mortgage loans on homes with gas leases because they don’t meet secondary mortgage market guidelines, meaning homeowners with a gas lease won’t be able to sell their homes if the buyer requires a mortgage. Gas leases may void title insurance as most policies do not cover any commercial ventures. New construction, one of the bases of economic recovery won’t start where residential fracking is because construction loans require a property to be free of the risks that gas drilling brings. Some communities are already seeing a softening of second home sales with buyers holding off making any investment until the issue of fracking is resolved. For more on the problems with residential mortgages, please click here.

Fracking Would Hurt Traditional Economic Endeavors

Existing industries such as tourism, outdoor recreation and agriculture are incompatible and threatened by gas drilling. Tourism is a billion-dollar industry in the mid-Hudson and Catskills, responsible for nearly 6,000 jobs in Orange County, more than 3,000 in Sullivan and more than 5,000 in Ulster. Fracking would make it much less likely that people would come to the Catskills to experience our natural beauty, fish, hunt and enjoy our pure air and water. It would destroy a diverse economy and threatens the projected income from these industries that over the long term stand to contribute greater economic gain than gas drilling.

Fracking Fosters a “Boom and Bust” Economy

It is important to remember than the when the gas is extracted, the companies will move out and whatever capital base has been increased in the short-term will disappear. Gas companies leave ravaged landscapers that can no longer support the original economy.

Fracking Can Destroy People’s Health

Perhaps the worse consequence of gas drilling using hydrofracking is the damage it can do to the health of people in our communities. There is no price tag for the loss of someone’s health. The time course for manifestation of illness related to the toxins associated with gas drilling may be months, years, or decades. Environment-related cancers can take 15 to 30 years to develop. In Louisiana, where the petroleum industry is well established, parts of the state are called “cancer alley” as a result of higher lung, liver and other cancers associated with the industry. Fracking has been linked to asthma, infertility, ADHD, autism, diabetes, thyroid disorders, brain disorders, many types of cancer and more. For more on the health impacts of gas drilling, please click here.

Based on extensive study and scientific evidence, Catskill Mountainkeeper has called for a ban on fracking. We are also working within the existing regulatory process in New York to raise critical issues, widen the discussion of the impacts of drilling, and expand the options available to protect the public.